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How can China retaliate to Trump tariffs?

FILE PHOTO: China president Xi Jinping

Beijing, China | AFP | Beijing says it is ready to retaliate if President Donald Trump goes through with his threat to impose punitive tariffs on another $300 billion in Chinese goods on September 1.

The 10 percent duties would extend Washington’s border taxes to almost every import from China, with the new batch likely to include hairdryers, sneakers, flat-screen televisions, bridal wear, toys, and many other products.

China on Friday did not specify what type of “counter-measures” it would take against the US, but here are some of its possible next moves:

– Tariff tussling? –

Beijing has already levied retaliatory charges on almost all US goods arriving in China — roughly $110 billion out of an annual total of $120 billion.

But the size of the tariffs currently range from five to 25 percent and Beijing could easily hike them a further 10 percent or more.

“US farm and energy products are very reliant on China’s market, if we raise tariffs on these so they’re even higher, Trump’s base voters will feel the pain badly,” said Zhang Yansheng, chief researcher at the China Center for International Economic Exchanges.

– Halt farm goods purchases? –

The multiple rounds of tit-for-tat tariffs have already battered trade, with China’s American imports shrinking 30 percent in the first half of the year.

American farmers had looked set for some relief this week after China said Thursday that some firms had begun purchasing more US produce and others were making price inquiries on soybeans, sorghum and grain.

“While we don’t think China will necessarily raise its tariffs on US goods, we expect it to back away from recent ‘efforts to show goodwill’, mainly the resumption of purchases of agricultural goods,” said Louis Kuijs of Oxford Economics.

– Devalue the yuan? –

Trump regularly accuses the Chinese central bank of devaluing its currency to support exporting firms — Beijing has long denied the charges.

Allowing the yuan to fall could help offset the threatened 10 percent tariffs, but China’s financial policymakers also worry a falling currency could precipitate capital outflows, an equally damaging proposition.

China’s central bank on Friday held its reference rate for the daily fixing of the yuan at 6.9 to the dollar in onshore trading while the more freely traded offshore yuan tumbled as low as 6.9786 to the dollar according to Bloomberg — suggesting Beijing does not yet want to let its currency fall below 7 yuan to the dollar.

– Penalise businesses? –

China could make life difficult for US companies in the form of regulatory requirements or customs blockages.

Beijing “could increase its trade counter-measures by applying more non-tariff measures to US imports,” said Rajiv Biswas, an Asia economist at IHS Markit.

“Non-tariff barriers can create significant hurdles to imports of goods, particularly for perishable items,” said Biswas, noting US farm goods would be vulnerable.

“We are particularly concerned about increased regulatory scrutiny, delays in licenses and approvals, and discrimination against US companies in government procurement tenders,” said Craig Allen, president of the US-China Business Council.

– Boycott and blacklists –

China in May said it would release a blacklist of “unreliable” foreign companies and individuals, hitting back after the United States targeted its telecom giant Huawei with an export ban, curbing its access to crucial US-made components.

This summer China’s commerce ministry has repeatedly said the measures will be released “soon” — and another escalation could lead Beijing to finally publish its list.

China could also mobilise its legions of consumers. Amid frosty relations with Japan in 2012 and South Korea in 2017, boycott campaigns led to a 50 percent collapse in sales for both countries’ car brands in one month.

Beijing has also been suspected of curbing tourism to punish certain countries.

– Rare earth minerals –

Chinese state media have also dangled the threat of cutting exports of rare earth minerals to the United States — a key resource used in the production of everything from smartphones to military hardware.

In response the US vowed to take “unprecedented actions” to ensure its supply of strategic elements and rare earths, but the planned investment and development of domestic supplies could take time to ramp up.

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